Business Leaders Welcome Proposed Central Bank Digital Currency

Business leaders have welcomed the proposed introduction of a central bank digital currency (CBDC), which is deemed consistent with the Government’s quest to transform Jamaica into a digital economy and facilitate financial inclusion for more Jamaicans.

The Bank of Jamaica (BOJ) is spearheading implementation of the CBDC, a digital form of central bank-issued legal tender that can be exchanged on a one-to-one basis with physical cash.
Making the formal announcement during his 2021/22 Budget Debate presentation in March, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, said a CBDC pilot will be undertaken this year, ending in December, with a full rollout slated for early 2022.

Business analyst, Warren McDonald, says the CBDC augurs well for the thrust towards greater financial inclusion, in light of data suggesting that approximately 40-50 per cent of economic/business activities are informal and that many of these persons do not have bank accounts.

He notes that based on details about the CBDC, these persons can still be catered to once they have access to a mobile device that will enable them to engage in digital currency transactions, adding that “that is a big plus”.

Additionally, Mr. McDonald says based on financial developments globally, “I think we have to move in that direction, as it is in keeping with the Government’s policy of digitising the economy”.

“It’s the way that the world is going [and] we have to keep pace,” he adds, while noting that he sees “no real downside” to the CBDC.

Mr. McDonald emphasises the need for the authorities to institute measures that safeguard users against unscrupulous persons who may seek to exploit the facility.

Jamaica Manufacturers and Exporters Association (JMEA) President, Richard Pandohie, says the decision is indicative of the Government’s and, by extension, BOJ’s responsiveness to changes in the global environment “[and their] trying to put themselves in a position to capitalise [on those]”.

“I think the fact that they are looking at digital currency as an option [to facilitate business and commerce] seems to reflect that they have [adopted] a more modern way of looking at just how the global economic environment has been evolving and is functioning,” he tells JIS News.

Mr. Pandohie says that against this background, “any initiative that will allow the Bank of Jamaica to be more flexible and responsive is something that we would support”.

Jamaica Chamber of Commerce (JCC) President, Lloyd Distant Jr., describes the CBDC’s introduction as “long overdue”.

He notes that several other regional countries and fiscal authorities have undertaken similar engagements, citing among them the Eastern Caribbean Central Bank which he says commenced discussions in 2019 and work in 2020 to implement a CBDC platform.

“We (JCC) are pleased to see the progress that is being made to implement a CBDC locally. We are supportive of it and hope that the Central Bank can get it in place quickly,” Mr. Distant adds.

Meanwhile, Dr. Clarke said operationalising the CBDC will require some amendments to the Bank of Jamaica Act to give the Bank the sole right to issue digital currency as legal tender, noting that the same obtains with respect to notes and coins.

He further advised that the BOJ will issue CBDC to deposit-taking institutions (DTIs) and authorised payment service providers.

“Agents will have the ability to onboard [unbanked] customers who request a digital transaction account using their mobile device. Households and businesses will be able to use CBDC to make payments and store value at no cost,” he added.

The BOJ has cited wide-ranging benefits to be derived from central bank digital currency introduction.

Those accruing to individual consumers and businesses include the convenience of a digital alternative to cash that is seamless, secure and simple and greater financial inclusion, as persons who do not currently have a regular bank account will be able to access CBDC accounts in a manner that is easier and simpler.

Additionally, Jamaica’s financial system stands to benefit from increases in systemic efficiency and significant reductions in costs for cash distribution and storage; and increased services available to customers and an opportunity to innovate new products and systems complementary to CBDC use.

Meanwhile, the BOJ will benefit from increased efficiency by removing the time and effort taken to forecast currency needs and order new currency in advance; significant long-term cost savings, consequent on not having to replace digital currency as it will not suffer ‘wear and tear’ or get lost in circulation, and modernisation and expansion of the Central Bank’s currency minting and issuance processes, in addition to further expansion and modernisation of the national retail payments infrastructure, consistent with the desired increased digitisation of the economy.

In March, the BOJ announced that the Republic of Ireland-based technology provider, eCurrency Mint Incorporated, has been selected to support CBDC testing.

In a statement, the BOJ said eCurrency Mint, which was chosen after an “extensive” procurement process, will assist in initiating the seven-month pilot from May to December 2021, utilising the Central Bank’s Fintech Regulatory Sandbox.

The Sandbox is designed to provide a platform to encourage innovations in financial services, and promote competition and financial inclusion, as well as inform the framing of new or amendment of existing regulations.

The BOJ further indicated that eCurrency Mint will be the provider when the national CBDC rollout commences in early 2022.